Thursday, February 9, 2017

Cost of solar power (67)


Three weeks ago, I analysed the Levelised Cost of Electricity (LCOE) for the Sun Metals utility-scale PV project near Townsville, Queensland.  The LCOE was excellent, AUD 72 per MWh according to my standard assumptions.

Today, I’ll analyse another recently-announced PV installation in the same region, namely the Ross River Solar Farm.  As with Sun Metals, the Ross River project will have single-axis horizontal tracking, but now the panels will be crystalline PV as opposed to thin-film Cd-Te.  According to the project developers, the site is a 202 Ha disused mango farm, the peak capacity will be 135 MW and the cost is AUD 225 million.  Construction will commence in the first quarter of 2017 and is expected to take 12 months.

The output from Ross River Solar Farm is the subject of a power purchase agreement with EnergyAustralia as part of its obligations under the federally mandated Renewable Energy Target.  I’ll estimate the annual output using the same Capacity Factor as for the Sun Metals project, namely 0.28.  A defence of that CF is given here.  The annual production is therefore estimated as 0.28 × 365 × 24 × 135 = 331,128 MWh.

 Let me now estimate the LCOE for the Ross River Solar Farm using my standard assumptions:
  • there is no inflation
  • taxation implications are neglected,
  • projects are funded entirely by debt,
  • all projects have the same interest rate (8%) and payback period (25 years), which means that the required rate of capital return is 9.4%,
  • all projects have the same annual maintenance and operating costs (2% of the total project cost), and
  • government subsidies are neglected.
For further commentary on my LCOE methodology, see posts on Real cost of coal-fired power, LEC – the accountant’s view, Cost of solar power (10) and (especially) Yet more on LEC.

Note that I am now using annual maintenance costs of 2% of capital cost.

The results are as follows:

Cost per peak Watt              AUD 1.67/Wp
LCOE                                     AUD 77.46/MWh

The components of the LCOE are:

Capital           {0.094 × 225 × 106}/{331,128 MWh} = AUD 63.87/MWh
O&M              {0.020 × 225 × 106}/{331,128 MWh} = AUD 13.59/MWh

Conclusion

Well, the LCOE (AUD 77/MWh) isn’t quite as good as that for the Sun Metals project (AUD 72/MWh), but it’s still very good, and the second best that I’ve analysed in Australia.

This confirms the continuing decrease in the cost of solar power, as shown in the LCOE graphic below.  The graphic shows my LCOE results in USD/MWh over eight years at current exchange rates (AUD = USD 0.7541, EUR = USD 1.069, JPY = USD 0.00868, GBP = USD 1.2544) and with the value of currency depreciated at 1.75% per year.  Red indicates solar thermal projects; blue indicates PV projects.  Filled-in circles are for projects that were completed when I made my LCOE assessment; non-filled-in circles are for projects as announced, even if not completed.

My concluding observation is that whilst Australian politicians continue to bicker about the development of renewal energy in the local market, our enterprises and our citizens are just getting on with the transformation.  One day, in a short amount of time, the politicians will wake up and realise that the energy landscape has changed before their very eyes, at great disruption to incumbent large players, and in a way that helps lower our greenhouse gas emissions in line with the Paris Agreement.  What will the politicians squabble about then?


Monday, January 30, 2017

Cost of solar power (66)


This will be a first for me – I’m going to analyse the Levelised Cost of Electricity (LCOE) for a large PV installation in Cixi, China, 150 km south of Shanghai.  Because of China’s rapid industrialisation and cheap labour, I’m expecting the LCOE will be somewhere near the best in the world to date, but let’s see.

PV Magazine has the story, also reprinted in RenewEconomy.

The PV installation is 200 MW, presumably AC to grid.  The panels are mounted over a 299.5 Ha fish farm, “deliberately spaced far apart for enough sunlight to penetrate the water, which is critical for the growth of the fish beneath the surface”.  From the picture accompanying the article, it looks like the panels are fixed.

The project is expected to generate 220 GWh of electricity per annum (roughly enough for 100,000 homes) and cost 1.8 billion yuan (or USD 262.6 million at today’s exchange rate).  Construction started in late June 2016 and finished in December 2016.

The Capacity Factor for the Cixi project is 220,000 / (200 * 365 * 24) = 0.126, which is surprisingly low, given that the latitude is about 30°N and the solar resource should be good.  The CF value is consistent with fixed panels.

Let me now estimate the LCOE for the Cixi project using my standard assumptions:
  • there is no inflation,
  • taxation implications are neglected,
  • projects are funded entirely by debt,
  • all projects have the same interest rate (8%) and payback period (25 years), which means that the required rate of capital return is 9.4%,
  • all projects have the same annual maintenance and operating costs (2% of the total project cost), and
  • government subsidies are neglected.
For further commentary on my LCOE methodology, see posts on Real cost of coal-fired power, LEC – the accountant’s view, Cost of solar power (10) and (especially) Yet more on LEC.

Note that I am now using annual maintenance costs of 2% of capital cost. 

The results are as follows:

Cost per peak Watt              CNY 9/Wp
LCOE                                     CNY 933/MWh

The components of the LCOE are:
Capital           {0.094 × 1.8 × 109}/{220,000 MWh} = CNY 769/MWh
O&M              {0.020 × 1.8 × 109}/{220,000 MWh} = CNY 164/MWh

Conclusion

At the exchange rate of CNY 6.85 to the USD, the LCOE for the project is USD 136/MWh.  That’s quite a lot more expensive than recent big projects I’ve analysed as you can see from the graphic below.  The Capacity factor for the Cixi project is poor, hence the annual output is not as large as anticipated, and hence the LCOE is not up to international best practice.  I’m surprised.

The graphic shows my LCOE results in USD/MWh over eight years at today’s exchange rates (AUD = USD 0.75431, EUR = USD 1.06928, JPY = USD 0.00868, GBP = USD 1.25437) and with the value of currency depreciated at 1.75% per year.  Red indicates solar thermal projects; blue indicates PV projects.  Filled-in circles are for projects that were completed when I made my LCOE assessment; non-filled-in circles are for projects as announced, even if not completed.

Sunday, January 15, 2017

Cost of solar power (65)


It’s been six months since I blogged about the cost of PV projects, and I suspect that the cost of solar power has continued to fall rapidly.  Let’s see whether that’s true by estimating the Levelised Cost of Electricity (LCOE) for the Sun Metals solar PV plant, 15 km south of Townsville in Queensland, Australia.

PV magazine has the story.  The 100 MW installation will be complete in Q1 2018 and will exploit a connection to Sun Metals’ existing substation.  The project features one-axis tracking, thin film CdTe panels from First Solar and is part of a major upgrade of Sun Metals zinc operations. 

PV magazine states the cost of the project is AUD 155 million, but doesn’t explicitly mention the Capacity Factor.  So, let me use data from the Australian Renewable Energy Agency (ARENA), which says that the average Capacity Factor for one-axis tracking installations in Queensland is 0.28.  (By way of defence of this CF, it should be noted that the solar resource near Townsville is excellent, even if it doesn’t quite match that of the best locations in the world, such as Chile.)

Under that CF assumption, the annual output of the Sun Metals project would be 0.28 × 365 × 24 × 100 = 245,280 MWh per year.

Let me now estimate the LCOE for the Sun Metals project using my standard assumptions:
  • there is no inflation,
  • taxation implications are neglected,
  • projects are funded entirely by debt,
  • all projects have the same interest rate (8%) and payback period (25 years), which means that the required rate of capital return is 9.4%,
  • all projects have the same annual maintenance and operating costs (2% of the total project cost), and
  • government subsidies are neglected.
For further commentary on my LCOE methodology, see posts on Real cost of coal-fired power, LEC – the accountant’s view, Cost of solar power (10) and (especially) Yet more on LEC.

Note that I am now using annual maintenance costs of 2% of capital cost. 

The results are as follows:

Cost per peak Watt              AUD 1.55/Wp
LCOE                                     AUD 72.04/MWh

The components of the LCOE are:

Capital           {0.094 × 155 × 106}/{245,280 MWh} = AUD 59.40/MWh
O&M              {0.020 × 155 × 106}/{245,280 MWh} = AUD 12.64/MWh

Conclusion

Wow, the LCOE of AUD 72/MWh is a stunning figure for Australia and not far behind global best practice.  At today’s foreign exchange rate of AUD 1.00 = USD 0.75, my LCOE estimate is USD 54/MWh, which is way below my previous best result for Australia. 

As shown in the LCOE graphic below, the cost of solar power continues to fall rapidly.  The graphic shows my LCOE results in USD/MWh over eight years at today's exchange rates (AUD = USD 0.7495, EUR = USD 1.064, JPY = USD 0.00873, GBP = USD 1.2179) and with the value of currency depreciated at 1.75% per year.  Red indicates solar thermal projects; blue indicates PV projects.  Filled-in circles are for projects that were completed when I made the LCOE assessment; non-filled-in circles are for projects as announced, even if not completed.

It’s clear we are in the midst of an amazing technological/industrial revolution, even if this is not widely appreciated by the media in this country.  One might well ask how much longer this decline in the LCOE will continue!


 

Thursday, July 28, 2016

Cost of solar power (64)


Today we’ll analyse a proposed PV installation alongside the Gullen Range Wind Farm near Australia’s capital city, Canberra.  The Australian Renewable Energy Agency, ARENA, is providing AUD 9.9 million in support for the installation and describes the project thus – “Australia’s first large-scale solar farm to be located with wind turbines … in a development that promises more reliable, cheaper renewable energy”.

The logic here is that solar and wind are complementary renewable energy sources that produce power at different times throughout the year.  Co-location has the virtue of lowering various costs for the project, such as design, approvals, financing, grid connection and maintenance.  So it certainly seems like a meritorious idea, and I congratulate ARENA for contributing to this first-of-kind joint installation in Australia.

In the case of the existing Gullen Range Wind Farm, ARENA anticipates these co-location benefits might reduce the cost of the PV facility by AUD 6 million, representing nearly 20% of the potential cost.  With co-location, the cost of the 10 MW PV installation is AUD 26 million.

I’m grateful to ARENA’s media office for providing this link to the developers, Goldwind, and other information about the project.  The annual output of the PV facility is stated to be approximately 22,000 MWh per year.  That gives a Capacity Factor of 22,000 / (10 × 365 ×24) = 0.251, which is rather higher than I expected for a  fixed-panel system near Canberra.  The project is due to be completed in July 2017.

Let me now estimate the Levelised Cost of Electricity (LCOE) for the Gullen Range proposal using my standard assumptions: 

  • there is no inflation,
  • taxation implications are neglected,
  • projects are funded entirely by debt,
  • all projects have the same interest rate (8%) and payback period (25 years), which means that the required rate of capital return is 9.4%,
  • all projects have the same annual maintenance and operating costs (2% of the total project cost), and
  • government subsidies are neglected.
For further commentary on my LCOE methodology, see posts on Real cost of coal-fired power, LEC – the accountant’s view, Cost of solar power (10) and (especially) Yet more on LEC. 

Note that I am now using annual maintenance costs of 2% of capital cost.

The results are as follows:

Cost per peak Watt              AUD 2.60/Wp
LCOE                                     AUD 135/MWh

The components of the LCOE are:

Capital           {0.094 × 26 × 106}/{22,000 MWh} = AUD 111/MWh
O&M              {0.020 × 26 × 106}/{22,000 MWh} = AUD 24/MWh

Conclusion

The LCOE of AUD 135/MWh translates to USD 98/MWh at today’s currency conversion rates.  As mentioned, the project is due to be completed in mid-2017, so you can compare the LCOE with the other solar projects I have analysed via this graphic.  This project has a similar LCOE to other recent PV installations.

With reference to costs, it’s of interest to read Giles Parkinson in RenewEconomy.  He points out that the ARENA contribution in this case amounts to AUD 1.00 per peak Watt of capital cost, which is generous in comparison to ARENA’s anticipated contributions in a subsequent funding round.  For details, see the RenewEconomy article here.

My takeaway message is that the cost of renewable energy continues to fall.  I think smart money is investing heavily in new energy technologies, with stunning results to be realised in the near future.  For my personal investments, I divested all holdings in fossil fuel companies long ago.

Thursday, June 9, 2016

Cost of solar power (63)


The conservative side of politics in Australia has a goodly share of climate change deniers and fossil fuel proponents.  So it’s a delicious irony that the former leader of the Liberal Party (that’s the conservatives!), John Hewson, has now emerged as the Chairman of Solastor, a company that proposes to build a large solar thermal power station near Port Augusta.  RenewEconomy has details of the proposal (here, here and here).

I’ve written about the costs of a CST plant at Port Augusta before.  See here for details.

The Solastor proposal involves a modular heliostat/tower approach.  Each module will have a 24 m tower on which is sited a 10 tonne graphite block for thermal storage.  The footprint of the mirror field is 65 m × 35 m, for a total area of 2,300 m2.  We are told there will be approximately 100 heliostats per module, and I’m estimating the mirror area per module to be about 1,000 m2.

The thermal collection system then drives a conventional steam generator.  We are told only that the working steam temperature is 400°C and the storage temperature in graphite is 800°C.  We don’t know whether the condenser is water or air-cooled.

So this proposal is unconventional only in the sense of graphite as the storage medium.  Vast Solar are also aiming at a modular approach.

Before estimating the Levelised Cost of Electricity (LCOE) for the Solastor approach, let’s make a few back-of-envelope calculations about the performance using figures provided by RenewEconomy and Solastor.

Thermal collection:  Let me assume the optical efficiency of the field is 80%, the efficiency of the receiver is 95%, the mirror field area is 1,000 m2 and the DNI is 6.5 kWh per m2 per day.  Then the heat collected per module per day is 6.5 × 1,000 × 0.80 × 0.95 = 4,940 kWhth.  That agrees remarkably well with the figure given by Solastor in their slideshow presentation.

Thermal storage: The specific heat capacity of graphite is 0.71 kJ/kg.°C.  If the storage temperature range is 500°C, then the heat stored by a 10,000 kg graphite block is 10,000 × 500 × 0.71 kJth = 3,550 MJth = 0.986 MWhth.  That’s only about 1/3 of the thermal storage claimed by Solastor in their slideshow presentation.  I’m concerned that the thermal storage is under-specified for the requirements.

Solar multiple:  We are told in the RenewEconomy reports that Solastor proposes a 170 MW plant with 1,700 modules.  My estimate of the instantaneous collection capability of a 1,700 module system at 1 kW DNI per m2 is 1 × 1,700 × 1,000 × 0.80 × 0.95 = 1,292,000 kWth.  At a thermal to electric conversion efficiency of 33%, the possible power output would be 426 MWe, so the solar multiple of the proposed system is 426/170 = 2.5.

Cost and annual output:  According to figures provided by RenewEconomy, the 170 MW system to be completed in 2018 would cost AUD 1,200 million and have annual output 1,229,000 MWhe.  The Capacity Factor would be 1,229,000 / (365 × 24 × 170) = 0.83, which seems way too high to me (I would expect a figure of about 0.60), but let’s not quibble for the moment.

Let me now estimate the LCOE for the Solastor proposal using my standard assumptions:

  • there is no inflation,
  • taxation implications are neglected,
  • projects are funded entirely by debt,
  • all projects have the same interest rate (8%) and payback period (25 years), which means that the required rate of capital return is 9.4%,
  • all projects have the same annual maintenance and operating costs (2% of the total project cost), and
  • government subsidies are neglected.
For further commentary on my LCOE methodology, see posts on Real cost of coal-fired power, LEC – the accountant’s view, Cost of solar power (10) and (especially) Yet more on LEC.

Note that I am now using annual maintenance costs of 2% of capital cost rather than 3% as in posts during 2011. 

The results are as follows:
Cost per peak Watt              AUD 7.06/Wp
LCOE                                     AUD 112/MWh

The components of the LCOE are:
Capital           {0.094 × 1.2 × 109}/{1.229 × 106 MWh} = AUD 92/MWh
O&M              {0.020 × 1.2 × 109}/{1.229 × 106 MWh} = AUD 20/MWh

Conclusion

My LCOE estimates for comparable CST plants are Cerro Dominador (USD 121/MWh), the previous Alinta proposal for Port Augusta (AUD 218/MWh) and Atacama 1 (USD 149/MWh).   The Solastor LCOE would certainly be competitive with other CST plants provided Solastor could deliver on their performance and cost estimates.  However the team behind Solastor are not as experienced as other world-class CST players such as SolarReserve, so Solastor’s claims must be regarded with some suspicion until further details emerge.

This graphic has further details of the 63 LCOE estimates I have compiled.

Tuesday, May 10, 2016

Cost of solar power (62)


The PV world is buzzing with the recent announcement from the Emirate of Dubai about bids to construct the 800 MW Sheikh Maktoum Solar Park Phase III installation.  The winning bid was USD 30 per MWh; the under-bidder was USD 36.9 per MWh.  These bids are definitely under the cost of new-build fossil fuel power stations.

For information on the Sheikh Maktoum project, see here (RenewEconomy) and especially here (Apricum).

A couple of months ago, I reported on the Rubi PV project in Peru for which my estimate for the Levelised Cost of Electricity was USD 52/MWh.  Let’s see how the Sheikh Maktoum plant compares.

As is often the case, press reports for Sheikh Maktoum Solar Park Phase III do not give the hard information required for LCOE comparisons, namely peak power (AC to grid), capital cost and annual output.  All we have is 800 MW capacity and the winning bid: USD 30/MWh.

And as the linked Apricum report mentions …

“The price bid by Masdar/FRV [the winning bid for Sheikh Maktoum Solar Park III] is 19% lower than the second-lowest bid submitted by JinkoSolar.  It can be expected that both JinkoSolar and the third-lowest Acwa Power pushed their proposals very close to what can be considered commercially feasible today.  One may speculate how Masdar and FRV seemingly manage to play in a universe of their own.  Because the majority of the expenses for a solar plant lie in the upfront cost of construction, which gets recovered over numerous years, the cost of financing is a key overall cost driver.  One can suspect that Masdar had access to long-term financing through the wealthy emirate of Abu Dhabi that no commercial banks, the primary source of capital for the other bidders, could match in cost.

Bingo!  I reckon that hits the nail on the head.

The Apricum report also goes on to speculate (knowledgeably it seems to me!) that the winning bid incorporated one-axis tracking and that the capital cost for a 800 MW AC facility would be around USD 1.0 billion, or USD 1.25/Wp.

[For comparison purposes, my previous blog post contained reliable costs for 22 recent bids for government supported PV projects in Australia.  The average capital cost (AC to grid) was AUD 2.25/Wp, equivalent to USD 1.67/Wp at today’s conversion rate.  I expect things could be done a bit cheaper in Dubai, so let’s stick with Apricum’s cost estimate.]

What about the annual output of PV plants with one-axis tracking in Dubai?  My previous post referred to data from ARENA (Australian Renewable Energy Agency).  Out of the 22 projects that were described, the average Capacity Factor (AC to grid) for one-axis systems was 26%, and the CF figure for systems in the state of Queensland, probably a similar solar resource to Dubai, was 28%.  Let’s use that figure.

So for Sheikh Maktoum Solar Park III, we could estimate the annual output to be 24×365×0.28×800 = 1,962,240 MWh.

Let me now estimate the LCOE for Sheikh Maktoum Solar Park III using my standard assumptions:
  • there is no inflation,
  • taxation implications are neglected,
  • projects are funded entirely by debt,
  • all projects have the same interest rate (8%) and payback period (25 years), which means that the required rate of capital return is 9.4%,
  • all projects have the same annual maintenance and operating costs (2% of the total project cost), and
  • government subsidies are neglected.
For further commentary on my LCOE methodology, see posts on Real cost of coal-fired power, LEC – the accountant’s view, Cost of solar power (10) and (especially) Yet more on LEC.

Note that I am now using annual maintenance costs of 2% of capital cost rather than 3% as in posts during 2011.

The results are as follows:
Cost per peak Watt              USD 1.25/Wp
LCOE                                     USD 58/MWh

The components of the LCOE are:
Capital           {0.094 × 109}/{1.962 × 106 MWh} = USD 48/MWh
O&M              {0.020 × 109}/{1.962 × 106 MWh} = USD 10/MWh

Conclusion

The estimate using my standard methodology is nearly double the price bid by Masdar/FRV, USD 58/MWh compared to USD 30/MWh.  I think my maintenance costs are a bit high, but the biggest explanatory factor would be the financing costs.  I’m sure that the proponents for Sheikh Maktoum Solar Park III have financing costs that are much less than 8% per annum over 25 years.  There may also be taxation advantages that are specifically excluded in my methodology.

For comparison of these costs with installations around the world, please see my LCOE graphic (which I need to update).

One last comment.  The general trend is clear: the price of solar is coming down, the price of fossil fuel and nuclear generation is going up.  Moreover, the crossover point has probably already been reached, and if a realistic cost of carbon emissions were included then it would be game over for fossil fuel generators.